Indian Court Cancels 122 Telecom Licenses

Many of us already know about the spectrum auction curruption case in India. A year back we did a post on the lessons we can learn from the case India. Now when the PTA are all set to kick the specturm launch in March end the Supreme Court accros the border has given its rulling, cancelling 122 Telecom Licenses of worlds second larget mobile subscirber market.

This is a big setback for international investers, let’s see how this will effect the upcoming license auctions in Pakistan.

India’s Supreme Court on Thursday revoked all 122 telecoms licences issued under a scandal-tainted 2008 sale, a fresh embarrassment for the government and plunging the mobile network market of Asia’s third-largest economy into uncertainty.

The ruling is a setback for Prime Minister Manmohan Singh’s government, which oversaw the sale of the licenses at below-market prices, costing the exchequer up to $36 billion in lost revenues.

The licences affected by Thursday’s ruling include all of those held by Unitech Wireless, the Indian joint venture of Norway’s Telenor and Unitech.

“We have been unfairly treated as we simply followed the government process we were asked to,” the Telenor joint venture said in a statement. “We are shocked to see that Uninor is being penalised for faults the court has found in the government process.”

The telecoms scandal is the biggest of several that have emerged during Singh’s second term and triggered massive street protests last year. Two ministers, including former telecoms minister Andimuthu Raja, who presided over the 2008 grant process, have resigned. Raja is in jail awaiting trial.

“This country is no longer willing to allow these corrupt corporations and these corrupt public officials to retain the benefits of their illegal and corrupt actions,” said Prashant Bhushan, a lawyer and petitioner in the case.

India is the second-largest cellular market in the world by subscribers, with 894 million at the end of December, although the market is crowded with more than a dozen operators, making call rates among the lowest in the world and squeezing margins.

Investors and operators have long been calling for consolidation in the crowded industry, and Thursday’s ruling stands to benefit the country’s biggest operators, including Bharti Airtel and Vodafone.

“Players like Bharti Airtel and Idea Cellular with popular brands and strong balance sheets will be clear beneficiaries because they can take advantage of this situation and increase market share,” said Jagannadham Thunuguntla, Head of Research, SMC Investments and Advisors, Mumbai.

Stocks in telecoms companies including Reliance Communications and Unitech fell after the verdict, but shares in Bharti Airtel jumped.

“For foreign investors, it is a very bad news. What mistake did they do? They partnered with Indian companies, invested lots of money and followed the process of that time,” said Rishi Sahai, director at consultancy firm Cogence Advisors in New Delhi.

The Supreme Court said the current licenses will remain in place for four months, in which time the government should decide fresh norms for issuing licenses, a lawyer involved in the case said.

India’s image as an investment destination was dented over the past year as the economy slowed, government reforms stalled and the telecoms scandals along with other high profile graft cases heightened concerns about government policies.

“This is a collective failure of the government of India, said S ubramanian Swamy, an opposition politician who brought the petition to revoke the license. ” The court has said that the government must now get the market value of these licenses .”

Loop Telecom Pvt Ltd and Videcon Telecommunications, part of India’s Videocon group are also affected, along with Etisalat DB, the joint venture between Abu Dhabi’s Etisalat and India’s DB group; and S-Tel.

Thirteen licences held by Idea Cellular and three held by Tata Teleservices are also affected.

About the Author

Arsalan Mir is a Telecom enthusiast with engineering background based in Lahore. On professional front, he is the Director Operations at the Target Group. He can be reached at arsalan (at) telecompk (dot) net